HR Alert: DOL’s New Internship Guidelines

November 1, 2018 | posted by Abacus Payroll

Internships provide efficient ways to groom potential employees for your firm without the hefty onboarding training—and, in many cases, salary—which accompanies an actual employee. Unfortunately, some employers violate the extent to which an unpaid intern can remain unpaid, often without even know what the limitations are. For this reason, the DOL created a test earlier this year to help you determine whether or not you need to pay your interns; here’s how it works.

The Primary Beneficiary Test

The Department of Labor calls the test itself the “Primary Beneficiary Test”. Released in February of this year, the test is applicable on a national scale; its main purpose is to make clear the line between unpaid intern and paid intern while leaving the ultimate decision in the hands of employers by allowing them to perform the test themselves.

Unlike similar tests from previous years, the Primary Beneficiary Test is not a simple “yes” or “no” questionnaire. The DOL’s test comes in the form of seven hypothetical statements, each of which you must consider as individual factors in addition to considering the whole document when making your decision. The hypotheticals to consider are as follows:

The expectation of compensation from both the employer and the intern
The training inherent in the internship, and whether or not the training goes above and beyond usual onboarding
The internship’s link to a formal academic program
The internship’s observance of a traditional academic calendar
The percentage of the internship which comprises beneficial learning rather than direct application
The mutual understanding that the internship doesn’t imply entitlement to a paid job at your company

One may examine each of these statements in isolation, but the idea is that you meet each of these criteria as a whole when taking on an intern. The alternative to doing so is, of course, compensating them for their time.

Compensation

Simply put, you can’t pay—or imply that you’ll pay—interns. The same goes for offering non-cash incentives for completing work or other work-related tasks. If you review the DOL’s guidelines for internships and determine that you expect to pay, compensate, or reward monetarily the intern, you have to hire them as an actual employee instead.

This also applies to the internship selection process. Just as you would make unique office conditions known to a potential new hire, it’s imperative to let any interns know that the position is unpaid and will remain as such for the duration of the internship.

Training

Your primary purpose for having an intern is to educate them in the processes inherent in your field. Thus, if the intern’s training extends beyond the traditional onboarding process for your company—that is, if you mentor them for a position in the field rather than simply showing them how to work in your company’s environment—you can consider them an intern, especially since the experience they’re obtaining is sufficient to cover the work they’re doing.

This falls through the moment you cease training and start expecting them to work on the same schedule as the rest of your employees, so make sure your intern is constantly learning for the entire time they’re with you.

Academic Requirements

To consider an intern as such, you have to respect their academic requirements. These can range from an institution’s schedule to a minimum number of hours spent working, so check in with your intern (or, ideally, their school) to see what the intern needs to accomplish while with you.

Perhaps most important to the DOL is the observation of traditional academic hours and days. Asking your intern to come in on a weekend—especially a Sunday—or requiring them to stay late on a school night is generally a sign that you should start paying the intern rather than compensating them with job experience.

Reviewing Your Test

Ultimately, whether you restrict your intern to internship-like conditions or employ them is up to you based on the test’s answers; however, looking at the test should give you a clear-cut answer as to whether or not the intern deserves compensation. For example, if you don’t plan on compensating them but you expect them to come in outside of a typical academic timeline or do work outside of their reasonable beneficial training, the obvious choice is to pay them for their time.

Ultimately, if your intern is lessening significantly your workload rather than adding to it, hiring and paying them—even if only for a semester—is probably the safest bet.

Even with the DOL’s intuitive new guidelines, delineating between an intern and a traditional employee can prove challenging. For more information on how you can make the right call when bringing in new interns (and employees) this year, call Abacus Payroll at (856) 667-6225 for your free consultation today!

About the Author: Abacus Payroll

Abacus Payroll, Inc. is a leading provider of payroll solutions for businesses of all sizes. Whether yours is a family-owned small business or a national corporation, we provide payroll, tax and other financial services on time and at an affordable price. Unlike other payroll providers, Abacus Payroll will assign your very own payroll specialist who will understand your payroll needs inside and out. So no more speaking to a different person each time, no more sitting on hold for hours and most importantly no more missed deadlines! Contact us today to see how we can help your business. You can count on us.